Home Depot's earnings powered by strong U.S. housing market

(Reuters) - Home Depot Inc’s profit and revenue beat market estimates for the sixth straight quarter as more shoppers visited the No.1 U.S. home improvement chain and, on an average, spent more in an improving housing market.

FILE PHOTO: The logo of Home Depot is seen in Encinitas, California April 4, 2016. REUTERS/Mike Blake/File Photo

Shares of the company, which raised its quarterly dividend by 15.7 percent to $1.03 per share, were up 2.6 percent in premarket trading. Smaller rival Lowe’s Cos Inc was up 0.9 percent.

The U.S. housing market has been on a winning streak, helped by rising employment and higher wages. That has encouraged homeowners to buy new homes or remodel existing ones, benefiting Home Depot and Lowe’s.

“We believe the (Home Depot) story offers a combination of macro and internal drivers which we expect to stay healthy in 2018,” Morgan Stanley analyst Simeon Gutman said in a note.

U.S. housing starts jumped 9.7 percent in January, to their highest level since October 2016, while homebuilding rose to a more-than-one-year high, according to Commerce Department data released last week.

Home Depot said Tuesday sales at its stores open for more than a year rose 7.5 percent in the fourth quarter ended Jan. 28. That beat analysts’ average estimate of a 6.5 percent increase, according to Thomson Reuters I/B/E/S.

The number of customer transactions rose 2 percent in the quarter, while the average check value rose 5.5 percent.

The company’s shares have risen about 32 percent in the past 12 months, outpacing the roughly 26 percent increase in Lowe’s and the 21 percent gain in the S&P 500 consumer discretionary index.

Home Depot’s results are in contrast to that of Walmart Inc, which on Tuesday reported a lower-than-expected quarterly profit and posted a sharp drop in online sales growth during the holiday period.

Home Depot forecast comparable store sales growth of 5 percent for its current fiscal year, shy of analysts’ estimates of a 5.4 percent increase.

But, the forecast matched Gutman’s expectations and “... is a clear indication that the segment is strong and consumers are allocating their spending dollars towards home improvement.”